Sunday, December 15, 2013

Time to ditch the privatization/contracting delusion (once again, with feeling)

Back in 2011 I posted two items (here & here) on the dawning recognition that the vogue for outsourcing government functions to commercial contractors has largely proved be a debacle, especially in the military & national-security fields—one more exercise in what C. Wright Mills used to call "crackpot realism," abetted by the strange mixture of pro-market ideological delirium and practical corporate welfarism that has infected so many areas of public policy over the past several decades.

I could have followed up those items with a constant stream of blog posts on the same topic, but why keep belaboring the obvious? However, since this reality is still not obvious to everyone, and since the drastic and harmful reductions in overall government spending in the US since 2009 mean (among other
things) that federal and state and local governments are hemmorhaging public employees and civil servants of every sort at an unprecedented rate ...

In theory, these contractors are supposed to save taxpayer money, as efficient, bottom-line-oriented corporate behemoths. In reality, they end up costing twice as much as civil servants, according to research by Professor Paul C. Light of New York University and others has shown. Defense contractors like Boeing and Northrop Grumman cost almost three times as much. [....]

Washington lavishes taxpayers’ money on for-profits. Many smaller contracting firms making good money for doing relatively little work ring the nation’s capital and are commonly known as Beltway Bandits. Remarkably, some of these enterprises set themselves up with a Bermuda mailbox to escape paying the federal taxes – perhaps most notably Accenture, which runs the IRS website. (Accenture maintains that its structure was not designed to avoid taxes.) [....]

But shoddy work doesn’t mean you will get fired from a government contract. Nor can that lackluster effort, like the disaster that is the Obamacare signup website, be blamed on inadequate pay to hire talent to set up a reliable website. Last year, contractors were allowed to charge the government as much as $763,029 per worker. [....]

For-profit contractors charge not just for salaries, but also for management pay and perks – like corporate golf outings and executive retreats – as well as the cost of renting space or operating buildings the contractors own, plus any other overhead. In a congressional hearing in March Senator Claire McCaskill, D-Missouri, revealed that of the $31.5 billion in invoices contractors submitted to the U.S. Army, $16.6 billion was for overhead. [....]

And there's another interesting wrinkle, which belongs in the category of 'astonishing but not really surprising':

Essentially, the federal government operates two contracting systems, separate and unequal. One hires profit-making corporations, the other handles nonprofits. [....]

The nonprofit contractors that get federal contracts are varied. They include soup kitchens and emergency shelter providers, some run by churches and others by secular institutions. They are forced to operate under much more stringent rules than those regulating the for-profit sector. [....]

“The government expects nonprofits to do work for less than the cost of doing the work,” said Rick Cohen, who negotiated nonprofit contracts with federal agencies and now writes about such issues for Nonprofit Quarterly.

Cohen broke into laughter when asked about a nonprofit billing for overhead costs. “Unlike corporations, the feds don’t let you charge anything for indirect costs, certainly not anything close to reality,” he said. “Corporate contractors operate in whole different world from nonprofits,” which he said are treated with suspicion and are closely audited compared to corporate contractors.

“The government also makes it a practice to be late paying nonprofits, which is why so many of them are in a constant cash crisis,” he said. [....]

As the Good Book says, "Unto him that has, more shall be given, and he will have an abundance; but whoever does not have, even what he has shall be taken away from him." You can read the whole article here

About Me

Jeff Weintraub is a social & political theorist, political sociologist, and democratic socialist who has been teaching most recently at the University of Pennsylvania, Bryn Mawr College, and the New School for Social Research, He was a Visiting Scholar at the Center for European Studies at Harvard University in 2015-2016 and a Research Associate at the Graduate School of Social Work and Social Research, Bryn Mawr College.
(Also an Affiliated Professor with the University of Haifa in Israel & an opponent of academic blacklists.)